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Cardano Gets Ready for the Battle

At the end of February 2021, Cardano became the third cryptocurrency by market capitalization by CoinGecko rating, inferior only to two veterans – Bitcoin and Ethereum. Coinbase Pro has recently listed ADA, prior to which, in March of this year, the price of Cardano’s native token soared by another 20% after the announcement of the upcoming listing. Let’s try to dig deeper into the topic and understand what are the advantages of Cardano and why it aspires to be the new Ethereum.

Founded as far back as 2015 by Input Output Hong Kong (IOHK) and Charles Haskinson, the former co-founder of BitShares, Ethereum and Ethereum Classic, Cardano is a blockchain platform based on a consensus algorithm called ouroboros proof-of-stake, the whitepaper of which was presented four years ago. It determines how consensus is achieved in the network, i.e. it actually sets who generates new blocks and checks the transactions. These functions are assigned by slot leaders. Any coin holder can become a leader of a slot when the consensus chooses it. The ability to form a new block is proportional to the quantity of shares that belong to the coin holder, the higher the number of coins, the higher the probability of becoming a leader of the slot.

This protocol allows Cardano to solve one of the main tasks – scalability, which significantly increases such a parameter as the number of transactions per second (TPS).

What Makes Cardano Different from Others?

PoW and PoS are the models of verifying and confirming transactions in mining. In PoW, miners are rewarded for solving cryptographic problems. With PoS technology, miners don’t need any special equipment, it is enough to have a wallet and a certain number of coins to confirm the transaction.

The main advantage of Cardano is the multi-level network organization. There are two layers of the network – the Settlement layer that manages the transfers of ADA tokens and the computing layer on which smart contracts can work. This division is the reason why it became possible to split token transfers from the information about them contained in the smart contracts.

Another unique feature is the sidechain protocol, which allows interaction between different networks. It lets them move seamlessly, for example, from the Bitcoin blockchain to Ripple without intermediaries. Cardano developers introduced this feature because they assume that in the future there will be several major cryptocurrencies and transfers between them should be possible without any middlemen.

At the same time, it is important to note that there are certain rules and requirements for the blockchains between which the transfer is made. Such blockchains must support sidechain technology, therefore not all projects are eligible to use this feature. To interact with other blockchains, Cardano supports KMZ sidechains, developed by Kiayias, Miller, and Zindros, based on preliminary proof-of-work results. The KMZ sidechain protocol allows assets to move safely inside Cardano and onto other blockchains, and you can interact with the Cardano computing layer without having to share the data that should remain confidential. In general, KMZ sidechain operates much like other sidechain solutions like Lightning, Celer, or Matic.

Different platforms use different add-ons to create bridges between blockchains. Polkadot, for example, is called a multi-chain network. Blockchains can connect to it and run in parallel as so-called “parachains”. Avalanche uses subnets, one of which (C-chain) is compatible with the Ethereum Virtual Machine and thus solidity smart contracts and dapps can be easily transferred to the network.

Observers call Cardano the main competitor of Ethereum, the world’s second-largest cryptocurrency that is currently working on the solution for transitioning from PoW to PoS to reduce power consumption significantly. Experts say that Cardano already has what Ethereum will have after the update, which may take 2-3 years. The transition to Ethereum 2.0 will be carried out in three stages and bring three core changes: the change in the consensus algorithm, the change in the model and the type of the blockchain. And while Bitcoin processes 4.6 TPS and the first version of Ethereum does a bit better with 15-20 TPS, Cardano could process 257 transactions per second after the first test of the chain in 2017.

Moreover, the project developers have just announced the update to the protocol layer called Alonzo. The modernization, which is supposedly scheduled for this summer, will introduce support for smart contracts. Since then, developers will be able to create smart contracts and decentralized applications (dApps) for decentralized finance directly on Cardano. That, of course, should serve as a huge drive not only for the ADA price, but also for further expansion of the ecosystem.

What Can I Do with ADA? 

ADA is Cardano’s native token. ADA price fluctuates but holds up as buyers expect 78% price increase after the Alonzo update. At the time of writing, ADA is trading at $1.23.

Staking ADA allows you to participate in creating new blocks even if your computer is turned off. You can choose a pool where you want to delegate your coins. This means that your coins i.e. your share will become part of the total power of the pool. You must select a pool by name and confirm the transaction through the delegation certificate. Herewith, your ADA coins do not leave the wallet, only a delegation certificate is sent.

What to Expect from Cardano

Nick Carter, a co-founder of Castle Island Ventures and Coinmatrics, said that Cardano does not have any notable use cases. And that might seem true, as the projects hive has not been spotted on the blockchain yet. Nevertheless, the founder and CEO of Input Output Hong Kong Charles Hoskinson believes that hundreds of projects will migrate from Ethereum to Cardano very soon. 

About a month ago, Hoskinson told Bloomberg about much bigger plans than just pushing Ethereum out of DeFi – the company aims for the entire countries to use Cardano for administrative purposes. However, at the moment the project remains unprepared to accept new residents, it will become possible when the Cardano functionality “reaches a high level”. But the first steps are already being taken, at the end of last year Singularity NET, the first decentralized AI network, discussed the migration to Cardano with the blockchain management team.

On top of that, it has recently become known about the launch of the new type of the algorithmic stablecoin AgeUSD, which will be created on the blockchain. Pegged to the US dollar, it is going to be the first stablecoin in the network. The news came after mid-April and the presentation of the project is expected after the Alonzo update launch. AgeUSD is the result of a collaboration between Input-Output Global, Cardano’s parent company, blockchain solutions provider Emurgo, and the Ergo Foundation. So, take your seats, maybe very soon (towards summer) we will witness a big crypto explosion.

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